Jacques slid into one of my guest chairs and adjusted his trousers by pulling up at the pleat near his knees. He was in one of his dark, grey pinstripe suits. A white, three point handkerchief stood at attention in the suit’s breast pocket. A solid, maroon tie matched the redness of his eyes.
He said, “We are losing deals from those customers we delivered the reliability offer to. Want to know why?”
“Why?”, I said.
He said, “Because our pricing was not in line with the other bids. It seems some customers continue to keep this information close to their vest. For as long as I can remember, trying to close deals based on price has been the way customer check our solutions against our competitors.”
I said, “Using price to compare our offerings versus others is a long standing habit.”
He said, “Yes, and they were big deals that I’m having a hard time letting go of.”
I waited a beat and said, “I see that. I’m sorry. What do you suggest we do about it?”
He said, “I want you to fix it. I can get you another meeting with the procurement folks, but I want you to fix it.”
I don’t remember any of the procurement folks objecting too much. Ensuring all the other parameters, like price, quality, lead time and support were in line with the other bids was a key part of our offer. I’ve seen Jacques get excited from time to time and blow things out of proportion.
I said, “You get me those meetings and I’ll see what I can do.”
One Week Later
The procurement manager asks, “Why do you want to know if your pricing is in line or not? Why don’t I get the best price right out of the box?”
I said, “As you know, a supplier costs can vary for amny different reasons.”
She said, “Yes, so give us your best price.”
Persistent, isn’t she? The best price usually ends up being a lower price. Sometimes a price much lower than we would like it to be. Yes, sometimes we offer a low price for many reasons, like trying to get an in with a new customer. But, Jacques says we should have closed the last deal with this customer. The products and services we offered are our bread and butter. I needed to take a different tact.
I said, “I also well understood a company wants to make as much money as they can. Like us, it’s done in two ways. One, getting the best price for the required purchased items. And two, keeping costs under control in all other areas of the business. Especially in operations during the manufacture of your customer’s order the supplier items were purchased for.”
She said, “Yes, so?”
I said, “Someone like Mr. Townsend, your General Manager, is interested in the bottom line impact of all those actions, right?”
She said, “Yup, he sure is. That’s why I’m trying to get the best price from you.”
I imagined he was sitting in the room right now.
I said, “If Mr. Townsend was here now, I would say something like this––compare getting the best price from us versus keeping your costs under control. For example, through price negotiations with suppliers like us, you could save your company about 10-20% per order. That’s usually a few thousand dollars, right?”
She says with a wink, “At least.”
I said, “But keeping costs under control means less rescheduling of your equipment, better equipment use, less breaking set-ups to run small batches, better worker efficiencies by keeping them busy, and minimizing the need for overtime. These actions can save your company thousands of dollars, right?”
She said, “Right.”
I said, “Not only that, but maintaining good relationships with your customers, by delivering your own products on time, a customer is willing to give you repeat business. Repeat business means an impact of millions of dollars.”
I could see her thinking. She said nothing.
I said, “Imagine irritating customers by delivering your order to them late because you chose a supplier who delivers late. Some customers may not order from you again. This is a big loss and doesn’t help Mr. Townsend’s bottom line at all. Has this happened to your business?”
She said, “Yes, and we can’t afford to have it happen. Again!”
Now it’s time for me to summarize, I said, “So, for us not to ask about our pricing being in line limits the amount of bottom line benefits your company can receive from a reliable supplier like us. Not only will we be competitive on price, but we’ll bring even more benefits to your company by delivering on time. That’s why we want to know if our prices are in line or not.”
She said nothing.
I said nothing.
Then she said, “Alright, I’ll let you know when your prices are not in the ball park; I’ll let you know when they are in the next county.”
On my way back to the office, I called Jacques and summarize my meeting. Double check pricing being in line and the benefits it brings with the procurement agent. If necessary, confirm the benefits to the whole company by finding a senior level executive who sees the whole picture. If you can get a person like this in the meeting, even better.
He was grateful, but asked when I would be visiting other customers. I said I was busy running my own part of the business. So, I suggested he put a workshop together for our sales force and I would be there to help.
I had already thought about the kind of sales person we needed to deliver the reliability offer. Using the conventional mode of offering features and benefits of the product itself was not going to be enough. It’s not rocket science, but the right sales people needed to be selected and the training had to be effective.